CenterPoint Energy, Inc.
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CenterPoint Energy's net income for the second quarter of 2003 was $63 million, or $0.21 per diluted share, compared to $236 million, or $0.79 per diluted share, for the same period of 2002. During the second quarter of 2003, the company recorded a loss of $20 million from discontinued operations primarily related to the company's planned sale of its energy management services business. During the second quarter of 2002, the company recorded income from discontinued operations of $150 million primarily related to Reliant Resources, Inc.'s (RRI) results. As previously reported, the company distributed its investment in RRI to CenterPoint Energy shareholders on September 30, 2002, and RRI's historical results are reported as discontinued operations.
Net income for the six months ended June 30, 2003 was $232 million, or $0.76 per diluted share compared to $267 million, or $0.90 per diluted share for the first six months of 2002. During the first six months of 2003, the company recorded a benefit of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations" and a $13 million loss from discontinued operations. The first six months of 2002 included income from discontinued operations of $36 million primarily related to RRI.
"I'm very pleased with the financial results of the second quarter, especially in light of much higher interest costs this year," said David McClanahan, president and chief executive officer of CenterPoint Energy. "Each of our business segments reported improved operating performance even after taking into account a significant increase in pension and insurance costs. I'm very proud of what our employees have accomplished and their continued focus on what we do best -- delivering electricity and natural gas safely and reliably.
"In addition, we have made substantial progress in improving our financial stability and liquidity," said McClanahan. "We continued to access the capital markets during the second quarter, and so far this year we have raised over $3 billion. We used these proceeds to pre-fund maturing debt, to refinance higher coupon debt, to pay down the company's bank facility and enhance our liquidity."
SECOND QUARTER HIGHLIGHTS
The company's operating performance and cash flow for the second quarter of 2003 compared to the same period of 2002 were affected by:
-- continued customer growth with the addition of almost 90,000 metered
electric and gas customers since June of 2002, or an annualized
2 percent growth
-- increased revenues of $9 million from rate increases in the natural
gas distribution operations
-- improved operating income for our subsidiary, Texas Genco Holdings,
Inc.
The electric transmission & distribution segment reported operating income of $235 million in the second quarter of 2003 consisting of $134 million for the regulated electric transmission & distribution utility and non-cash operating income of $101 million associated with generation-related regulatory assets, or ECOM, as described below. For the second quarter of 2002, operating income was $275 million, consisting of $105 million for the regulated electric transmission & distribution utility and non-cash operating income of $170 million associated with ECOM.
The regulated electric transmission & distribution utility continues to benefit from solid customer growth. Revenues increased from the addition of over 51,000 metered customers since June 2002 as well as the positive impact of weather. Operating expenses declined from the comparable period of 2002. Higher benefit and insurance expenses were more than offset by reduced staffing levels, the non-recurrence of certain expenses related to the transition to the deregulated market in 2002 and process improvements.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between market prices received by its affiliated power generation company and the prices used in the ECOM model established by the Texas PUC. During 2002 and 2003, this difference, referred to as ECOM, produces non-cash income and is recorded as a regulatory asset. The reduction in ECOM of $69 million from 2002 to 2003 resulted primarily from an increase in capacity auction prices at Texas Genco.
Operating income for the six months ended June 30, 2003 was $440 million, consisting of $207 million for the regulated electric transmission & distribution utility and non-cash operating income of $233 million for ECOM. This compares to $528 million for the same period of 2002 consisting of $217 million for the regulated electric transmission & distribution utility and non-cash operating income of $311 million for ECOM.
Electric Generation
Texas Genco owns 14,175 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. It reported operating income of $50 million for the second quarter of 2003 compared to an operating loss of $29 million for the same period of 2002.
Wholesale electricity prices were much higher in 2003 due to substantially higher natural gas prices which led to increased capacity auction revenues for Texas Genco's baseload products. Operating expenses increased in the quarter due to higher natural gas and purchased power costs and increased operation and maintenance expenses, partially offset by reduced taxes other than income taxes. Operation and maintenance expenses increased due to outage costs associated with baseload generation units, including $4 million related to an unplanned outage at Unit 1 of Texas Genco's 30.8 percent interest in the South Texas Project Electric Generating Station (STP) nuclear facility. In addition, higher pension, employee benefit and technical support costs contributed to the increase in operation and maintenance expenses. Texas Genco estimates that the added cost of replacement energy associated with the STP Unit 1 outage negatively impacted gross margin by approximately $20 million for the quarter.
Operating income for the six months ended June 30, 2003 was $33 million, compared to an operating loss of $81 million for the same period of 2002.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $21 million for the second quarter of 2003 compared to the prior year's second quarter operating income of $11 million.
The increase in operating income in the natural gas distribution segment resulted from continued customer growth, higher revenues from rate increases implemented late last year and improved margins from our commercial and industrial sales. These improvements more than offset increased expenses associated with higher pension, employee benefit and insurance expenses. The costs associated with a receivables facility, which was modified in November 2002, reduced operating income by $3 million, whereas prior to the amendment, these costs were included in interest expense.
Operating income for the six months ended June 30, 2003 was $151 million, compared to $118 million for the same period of 2002.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $42 million in the second quarter of 2003 compared to $39 million for the same period of 2002. The operating improvement was primarily related to improved revenues in the gas gathering operations. The segment continues to produce consistent operating income and stable cash flows.
Operating income for the six months ended June 30, 2003 was $85 million, compared to $76 million for the same period of 2002.
Other Operations
The company's other operations reported an operating loss for the second quarter of 2003 of $2 million compared to an operating loss of $7 million for the same period of 2002. The operating loss for the six months ended June 30, 2003 was $2 million, compared to no operating income for the same period of 2002.
Discontinued Operations
During the second quarter of 2003, the company sold its remaining investment in Argentina, a 90 percent interest in Edese, an electric utility distribution company. Through this sale, the company completed its strategy of exiting Latin America. In addition, the company is negotiating to sell CenterPoint Energy Management Services, Inc. (CEMS), which provides district cooling to businesses in the downtown Houston area. In the second quarter of 2003, the company recorded a $3 million loss in discontinued operations related to exiting Latin America and a $16 million impairment related to CEMS.
In the second quarter of 2002, the company reported income from discontinued operations of $150 million primarily related to RRI's results.
2003 OUTLOOK
CenterPoint Energy confirms its 2003 earnings guidance of $0.85 to $1.00 per diluted share from continuing operations. This reflects the company's outlook for continued solid operational performance by its business segments.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Tuesday July 29, 2003, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.CenterPointEnergy.com/investors/events . A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
The management of Texas Genco, the company's 81 percent owned subsidiary, will host an earnings conference call on Tuesday July 29, 2003, at 9:00 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.txgenco.com/investor.html . A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total approximately $20 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years.
This news release includes forward-looking statements. Actual events and results may differ materially from those projected. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas and other factors discussed in CenterPoint Energy's and its subsidiaries' filings with the Securities and Exchange Commission.
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Thousands of Dollars)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- ----------
Revenues:
Electric Transmission &
Distribution $481,772 $528,350 $929,175 $1,096,403
Electric Generation 578,511 413,648 937,098 739,295
Natural Gas Distribution 970,576 796,722 3,015,327 1,976,595
Pipelines and Gathering 121,716 102,408 230,824 194,351
Other Operations 9,322 6,955 18,252 13,946
Eliminations (70,997) (49,659) (139,608) (144,776)
Total 2,090,900 1,798,424 4,991,068 3,875,814
Expenses:
Fuel and cost of gas sold 1,080,857 862,058 2,940,003 1,904,620
Purchased power 22,974 4,258 34,968 52,624
Operation and maintenance 393,085 372,505 805,961 760,467
Depreciation and
amortization 157,263 151,072 309,544 299,481
Taxes other than income
taxes 90,691 119,134 193,535 217,285
Total 1,744,870 1,509,027 4,284,011 3,234,477
Operating Income 346,030 289,397 707,057 641,337
Other Income (Expense):
Gain (loss) on AOL Time
Warner investment 113,178 (230,214) 64,704 (447,811)
Gain (loss) on indexed debt
securities (98,253) 218,723 (55,550) 421,956
Interest (215,087) (139,847) (439,081) (257,599)
Distribution on trust
preferred securities (13,899) (13,850) (27,797) (27,749)
Other - net 1,629 7,664 4,788 14,788
Total (212,432) (157,524) (452,936) (296,415)
Income from Continuing
Operations Before Income
Taxes, Minority Interest
and Cumulative Effect of
Accounting Change 133,598 131,873 254,121 344,922
Income Tax Expense (44,346) (45,744) (85,455) (113,914)
Minority Interest (6,295) (7) (4,229) 4
Income from Continuing
Operations Before Cumulative
Effect of Accounting Change 82,957 86,122 164,437 231,012
Discontinued Operations:
Income from Reliant
Resources, net of tax --- 147,849 --- 34,450
Income (loss) from Other
Operations, net of tax (403) 1,674 (865) 1,788
Loss on disposal of Other
Operations, net of tax (19,331) --- (11,989) ---
Total (19,734) 149,523 (12,854) 36,238
Cumulative Effect of
Accounting Change, net of
minority interest and tax --- --- 80,072 ---
Net Income Attributable to
Common Shareholders $63,223 $235,645 $231,655 $267,250
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Current Report on Form 8-K of CenterPoint Energy, Inc.
dated May 12, 2003.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
------------------ --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Basic Earnings Per Common Share:
Income from Continuing
Operations before Cumulative
Effect of Accounting Change $0.27 $0.29 $0.54 $0.78
Discontinued Operations:
Income from Reliant
Resources, net of tax --- 0.49 --- 0.11
Income (Loss) from Other
Operations, net of tax --- 0.01 --- 0.01
Loss on Disposal of Other
Operations, net of tax (0.06) --- (0.04) ---
Cumulative Effect of
Accounting Change, net of
minority interest and tax --- --- 0.27 ---
Net Income Attributable to
Common Shareholders $0.21 $0.79 $0.77 $0.90
Diluted Earnings Per Common
Share:
Income from Continuing
Operations before Cumulative
Effect of Accounting Change $0.27 $0.29 $0.54 $0.78
Discontinued Operations:
Income from Reliant
Resources, net of tax --- 0.49 --- 0.11
Income (Loss) from Other
Operations, net of tax --- 0.01 --- 0.01
Loss on Disposal of Other
Operations, net of tax (0.06) --- (0.04) ---
Cumulative Effect of
Accounting Change, net of
minority interest and tax --- --- 0.26 ---
Net Income Attributable to
Common Shareholders $0.21 $0.79 $0.76 $0.90
Dividends Declared per Common
Share $0.20 (A) $0.375 $0.30 (A) $0.75
Weighted Average Common
Shares Outstanding (000):
- Basic 304,046 297,696 302,373 296,963
- Diluted 306,104 298,471 304,149 297,934
Operating Income (Loss) by
Segment
Electric Transmission &
Distribution:
Transmission & Distribution
Operations $133,316 $105,028 $206,954 $217,598
ECOM True-up 101,318 169,777 233,281 310,785
Total Electric Transmission
& Distribution 234,634 274,805 440,235 528,383
Electric Generation 50,044 (29,122) 32,928 (80,878)
Natural Gas Distribution 20,951 11,223 150,512 117,695
Pipelines and Gathering 42,355 38,988 85,249 75,926
Other Operations (1,954) (6,497) (1,867) 211
Total $346,030 $289,397 $707,057 $641,337
(A) Includes a dividend declared on June 18, 2003 payable on
September 10, 2003.
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Current Report on Form 8-K of CenterPoint Energy, Inc.
dated May 12, 2003.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Electric Transmission & Distribution
---------------------------------------
Quarter Ended June 30, % Diff
-----------------------
2003 2002 Fav/(Unfav)
----------------------- -------------
Results of Operations:
Operating Revenues:
Electric revenues $381 $358 6%
ECOM true-up 101 170 (41%)
Total Revenues 482 528 (9%)
Operating Expenses:
Fuel and purchased power --- (4) (100%)
Operation and maintenance 126 130 3%
Depreciation and amortization 68 66 (3%)
Taxes other than income 53 61 13%
Total 247 253 2%
Operating Income $235 $275 (15%)
Electric Transmission &
Distribution Operating Data:
Quarter Ended June 30,
-----------------------
Actual MWH Delivered 2003 2002
---------- ----------
Residential 6,490,357 6,295,795 3%
Weather (average for
service area):
Percentage of normal:
Cooling degree days 118% 108% 10%
Heating degree days n/a n/a n/a
Average number of
metered customers:
Residential 1,585,815 1,539,193 3%
Commercial and
Industrial 221,620 211,770 5%
Total 1,807,435 1,750,963 3%
Electric Generation
---------------------------------------
Quarter Ended June 30, % Diff
-----------------------
2003 2002 Fav/(Unfav)
----------------------- -------------
Results of Operations:
Operating Revenues:
Energy revenues $ 378 $ 307 23%
Capacity and other
revenues 200 107 87%
Total 578 414 40%
Operating Expenses:
Fuel and purchased power 372 299 (24%)
Operation and maintenance 105 79 (33%)
Depreciation and
amortization 39 39 ---
Taxes other than income 12 26 54%
Total 528 443 (19%)
Operating Income (Loss) $ 50 $ (29) 272%
Physical Electric
Generation Power
Sales (MWH) 12,517,490 14,643,805 (15%)
Electric Transmission & Distribution
-------------------------------------------
Six Months Ended June 30, % Diff
---------------------------
2003 2002 Fav/(Unfav)
--------------------------- -------------
Results of Operations:
Operating Revenues:
Electric revenues $696 $785 (11%)
ECOM true-up 233 311 (25%)
Total Revenues 929 1,096 (15%)
Operating Expenses:
Fuel and purchased power --- 56 100%
Operation and maintenance 259 270 4%
Depreciation and
amortization 133 130 (2%)
Taxes other than income 97 112 13%
Total 489 568 14%
Operating Income $440 $528 (17%)
Electric Transmission &
Distribution Operating Data:
Six Months Ended June 30,
--------------------------
Actual MWH Delivered 2003 2002
---------- -------------
Residential 11,048,552 10,769,260 3%
Weather (average
for service area):
Percentage of normal:
Cooling degree days 110% 108% 2%
Heating degree days 111% 100% 11%
Average number of
metered customers:
Residential 1,581,465 1,535,499 3%
Commercial and
Industrial 221,364 211,527 5%
Total 1,802,829 1,747,026 3%
Electric Generation
-------------------------------------------
Six Months Ended June 30, % Diff
---------------------------
2003 2002 Fav/(Unfav)
--------------------------- -------------
Results of Operations:
Operating Revenues:
Energy revenues $ 602 $ 547 10%
Capacity and other
revenues 335 192 74%
Total 937 739 27%
Operating Expenses:
Fuel and purchased power 592 528 (12%)
Operation and maintenance 211 174 (21%)
Depreciation and
amortization 78 79 1%
Taxes other than income 23 39 41%
Total 904 820 (10%)
Operating Income (Loss) $ 33 $ (81) 141%
Physical Electric
Generation Power
Sales (MWH) 21,793,836 26,447,104 (18%)
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Current Report on Form 8-K of CenterPoint Energy, Inc.
dated May 12, 2003.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Natural Gas Distribution
---------------------------------------
Quarter Ended June 30, % Diff
-----------------------
2003 2002 Fav/(Unfav)
----------------------- -------------
Results of Operations:
Operating Revenues $ 971 $ 797 22%
Operating Expenses:
Natural gas 761 604 (26%)
Operation and maintenance 137 125 (10%)
Depreciation and amortization 34 32 (6%)
Taxes other than income 18 25 28%
Total 950 786 (21%)
Operating Income $ 21 $ 11 91%
Natural Gas Distribution
Operating Data:
Throughput data in BCF
Residential and Commercial 36 49 (27%)
Industrial 12 13 (8%)
Transportation 11 13 (15%)
Non-rate regulated commercial
and industrial 111 96 16%
Total Throughput 170 171 (1%)
Weather (average for
service area)
Percentage of normal:
Heating degree days 89% 114% (25%)
Average number of
customers:
Residential 2,746,489 2,720,237 1%
Commercial and
Industrial 250,086 249,131 ---
Total 2,996,575 2,969,368 1%
Pipelines and Gathering
---------------------------------------
Quarter Ended June 30, % Diff
-----------------------
2003 2002 Fav/(Unfav)
----------------------- -------------
Results of Operations:
Operating Revenues $ 122 $ 102 20%
Operating Expenses:
Natural gas 35 10 (250%)
Operation and maintenance 30 38 21%
Depreciation and amortization 11 10 (10%)
Taxes other than income 4 5 20%
Total 80 63 (27%)
Operating Income $ 42 $ 39 8%
Pipelines and Gathering
Operating Data:
Throughput data in BCF
Natural Gas Sales 4 5 (20%)
Transportation 203 205 (1%)
Gathering 74 70 6%
Elimination (2) (1) (100%)
Total Throughput 279 279 ---
Natural Gas Distribution
------------------------------------------
Six Months Ended June 30, % Diff
--------------------------
2003 2002 Fav/(Unfav)
-------------------------- -------------
Results of Operations:
Operating Revenues $ 3,015 $ 1,977 53%
Operating Expenses:
Natural gas 2,455 1,488 (65%)
Operation and maintenance 284 256 (11%)
Depreciation and
amortization 67 62 (8%)
Taxes other than income 58 53 (9%)
Total 2,864 1,859 (54%)
Operating Income $ 151 $ 118 28%
Natural Gas Distribution
Operating Data:
Throughput data in BCF
Residential and Commercial 192 181 6%
Industrial 24 24 ---
Transportation 26 28 (7%)
Non-rate regulated commercial
and industrial 245 217 13%
Total Throughput 487 450 8%
Weather (average for
service area)
Percentage of normal:
Heating degree days 104% 99% 5%
Average number of
customers:
Residential 2,758,274 2,722,974 1%
Commercial and
Industrial 251,366 249,670 1%
Total 3,009,640 2,972,644 1%
Pipelines and Gathering
-------------------------------------------
Six Months Ended June 30, % Diff
--------------------------
2003 2002 Fav/(Unfav)
-------------------------- -------------
Results of Operations:
Operating Revenues $ 231 $ 194 19%
Operating Expenses:
Natural gas 56 17 (229%)
Operation and maintenance 60 72 17%
Depreciation and amortization 21 20 (5%)
Taxes other than income 9 9 ---
Total 146 118 (24%)
Operating Income $ 85 $ 76 12%
Pipelines and Gathering Operating
Data:
Throughput data in BCF
Natural Gas Sales 8 10 (20%)
Transportation 471 443 6%
Gathering 146 141 4%
Elimination (4) (1) (300%)
Total Throughput 621 593 5%
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Current Report on Form 8-K of CenterPoint Energy, Inc.
dated May 12, 2003.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Other Operations
----------------------------------------
Quarter Ended June 30, % Diff
------------------------
2003 2002 Fav/(Unfav
------------------------ -------------
Results of Operations:
Operating Revenues $ 9 $ 7 29%
Operating Expenses 11 14 21%
Operating Loss $ (2) $ (7) 71%
Other Operations
----------------------------------------
Six Months Ended June 30, % Diff
--------------------------
2003 2002 Fav/(Unfav
-------------------------- ------------
Results of Operations:
Operating Revenues $ 18 $ 14 29%
Operating Expenses 20 14 (43%)
Operating Loss $ (2) $--- ---
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Web site: http://www.centerpointenergy.com/
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